While the prices are falling, the property in metros is still expensive. The good news is that small towns and cities are emerging as complementary investment destinations. Smaller cities and large towns directly connected to tier 1 and 2 cities are becoming hubs because of the increased economic activity. Cities like Nagpur, Ahmedabad, Chandigarh, Jaipur and Coimbatore, which were earlier considered attractive because of their proximity to large cities and metros, are today seen as hubs themselves.

Affordability is one of the most important parameters (see Affordability in Smaller Cities). However, continuing to rely solely on cost savings will not be sufficient to ensure long-term growth. Contrary to perceptions, our research indicates that the level of risk in some smaller cities is no different from that in the metros. For example, Chandigarh, Kochi and Nagpur have levels of real estate transparency similar to those in bigger cities, says Puri.

While smaller cities still account for a relatively minor proportion of real estate activity (21% of modern offices and 34% of shopping malls), the potential of these tertiary markets is evident because of 41% of the country's wealth.

Also, given the government's renewed push to speed up infrastructure projects, many new avenues will be opened just because of locational advantages, and an early mover at the right location will make gains over the next threefour years, adds Sahni.